Farms are one of the most important sectors in the country. They provide food for Americans and for people abroad. Running a farm requires a lot of hard work and also involves high risks. In order to protect your farm, you need insurance to cover possible damages.
Some facts of farms in the United States:
- There are 2.2 million farms in America and they employ more than 20 million American workers.
- Most farms are operated by individuals or family corporations
- About 30% of farms are for export
- The US exported $115 billion worth of agricultural products in 2010
Liability insurance, also known as third-party insurance, is part of the insurance system to protect the insured from the risks of liabilities forced by lawsuits and if they are sued for claims within the insurance policy. This offers protection against third-party insurance claims such as payment is not for the insured but to someone who is suffering loss who is not part of the insurance contract. Damage caused intentionally and contractual liability are not covered in this kind of insurance. When a claim is made, the insurance provider has the right to protect the insured.
Basically, there are two important things to be remembered for liability insurance. First, to make payments on your behalf to an injured party. Second, to defend you against lawsuits filed against you. Farming is a business so you need liability insurance to protect you and your business.
In order for the insurer to be obligated to pay, something must happen, damage or injury occurs and the insured is legally liable for the damage.
Some important things to consider:
- Negligence – In order to recover the damages for negligence, the injured person must meet all the following: the insured is responsible for taking care of the injured person, the insured breached that duty of care, the breach of duty caused damages, and the number of their damages. The insured’s conduct is judged when they didn’t act responsibly or reasonably. Ignorance, honest mistakes, and physical defects of the injured should not affect the policyholders. However, people who directly engage in activities that would directly endanger them may be assumed that they know the risks.
- Farm employees – Businesses who hire workers increase their potential liability. A farm may be held responsible for the acts or possible injuries of their employees. They can also be held liable to damages to third parties caused by their employees so it is important that business owners should give proper instructions to their workers.
- Rented ground – Renters are responsible for their own negligence. The owner of the land is liable for their lands if something occurred.
- Fence law – Owners of livestock must be very careful in handling their livestock and prevent them from escaping and causing damage. If their animals escape and cause harm, the business owners are responsible. Some of the animals that can cause extreme damage are bulls, stallions, bucks, and boars.
- Agritourism – Agritourism has become a popular option for farmers to make additional income. Mazes, hayrides, farm tours, special events, and weddings are among the few examples of agritourism. Farmers should make sure to consider getting additional liability coverage to protect their business.
For farmers, you can purchase a business insurance policy that can cover your farmer liability insurance needs. Some of its coverage includes the following:
- General or Premises Liability Insurance – This could help you when a person visiting your farm is injured or a property on your farm is damaged. This could help you cover the costs of their medical expenses. If you often hold tours for your farms then this insurance can help you. One area of premise liability that deserves special attention is agritourism. Activities that go along with agritourism usually are not covered by your farm policy. This particular coverage can give you protection for most types of agritourism.
- Product liability insurance – The insurance can help you if your products cause illness or injury to people.
- Worker’s Compensation Insurance – This is required by our law. However, this depends on your state regulations and the number of workers that you have. If one of your workers is injured while working for your farm, then this can cover the costs of the medical expenses.
- Commercial vehicle liability insurance – You can insure all your farm vehicles in one commercial vehicle insurance policy. This can protect you from liability risks if one of your drivers for your vehicles injures a person or damages a property.
- Non-owned or for-hire vehicle liability insurance – The insurance can also protect you when your workers use their own vehicles in carrying their jobs for your farm such as someone transporting your farm goods. Your farm can be held liable for damages if your worker is involved in an accident while doing the job for your farm. This can only be covered if the vehicles are only being used for your farm.
Liability insurance will also include compensation for legal fees.
Business Property and Asset Insurance
Farmers also need business property and asset insurance. A firm business farmer policy will also provide you with coverage for loss or damage to your farm’s property and assets. Among the following are the options you might want to consider:
- Farm equipment insurance – You need to be sure that you have enough coverage if a fire happens in your farm or a falling object damages your expensive equipment such as tractors, threshers, and combines. A natural disaster might also damage your farm. This insurance can help you replace them without suffering a huge financial loss.
- Homeowners insurance – Most of the time, farm insurance policies let farmers insure their own homes on their business insurance policies. This can help you save money on your home and personal property insurance.
- Farm structure insurance – Your insurance can cover your barns, silos, pens, chutes, daily parlors, confinement policies, and corral fencing. Make sure to purchase enough coverage for these structures so you would not have problems and have the necessary funds when you face a natural disaster and in order to rebuild them.
- Livestock insurance – If your farm has livestock such as cows, sheep, goats, or swine, make sure to purchase insurance coverage so if they die due to accidental shooting, electrocution, or due to severe weather during transport, you can replace them.
- Crop insurance – The insurance provides compensation if your crops got damaged due to natural disasters such as heavy winds, drought, hail or extreme temperatures, price fluctuations, and unavoidable pests and diseases. You can have your own decision to choose which crops to cover, the insurance products to also choose, and the level of coverage. The crop insurance is the main center of the federal government’s effort to provide a safety net to the farmers. This is available nationwide and you have the freedom to choose the level of coverage. You actually have a wide range of crop insurance policies that you can choose. One is yield protection coverage which is available for major crops. Revenue protection, dollar value, and area risks protection may policies also be available. Prevented planting coverage is also a feature of many types of crop insurance policies. Yield-based crop insurance protects you from yield losses due to natural disasters such as drought, excessive temperatures, hail, wind, frost, insects, and disease. If your harvested goods plus any valued production is less than the yield you insured, you are paid for the loss that occurred. Revenue protection is available for corn, grain, soybean, barley, and wheat. Dollar plan coverage protects you from the declining value due to the damage of crops. Whole-farm revenue protection plan policies insure the revenue of your whole farm by giving you an approved percentage of your farm revenue.
- Continuation of income insurance or business income insurance – If there comes a time that you have to stop operations for your farm, the insurance will cover the continuation of income for your farm so you could continue to pay your bills and your workers. For example, this may be due to the loss of a barn to a fire or death of marketable animals in the barn. The income can be stopped until new animals can be raised again. Property insurance will pay for the loss of animals but the income flow will be covered by this insurance.
Not all farm businesses will need all types of insurance. One example is when a business with no employees and where the owner provides all the labor does not need employee dishonesty or workers’ compensation insurance.
The federal government also offers different programs to help you manage more risks. These four programs administered by USDA FSA that could affect your farms are the Non-insured Disaster Assistance Program, Agricultural Risk Coverage, Price Loss Coverage, and the Dairy Margin Coverage for dairy producers.
Non-insured Disaster Assistance Program
The Non-insured Disaster Assistance Program gives financial assistance to farmers that are not covered by the multi-peril crop insurance. This may be purchased for less than an acre of production per crop. This is designed to lessen financial loss when natural disasters cause major reductions in the productions of goods. This covers 50% – 65% in 5% increments at 100% of the average market price. This program can be acquired through your local USDA Farm Service Agency office. You are entitled to this program if the average adjusted gross income for the three preceding tax years is $900,000 or less. To purchase this coverage, you need to pay a service fee of $325 per crop per county. The payments are limited to a maximum of $125,000 per crop year for basic coverage and $300,000 for buy-up coverage per individual or entity. You are eligible for a waiver of the service fee and a 50% premium reduction if you are a beginner farmer or have a limited resource.
Agricultural Risk Coverage and Price Loss Coverage
Both Agricultural Risk Coverage and Price Loss Coverage are programs authorized under the Farm Bill. Farmers must choose between participating in these two programs. These two programs give you a choice of a county or farm-level revenue coverage. If the Agricultural Risk Coverage program is chosen, the farm is not allowed for the Supplemental Coverage Option under the crop insurance.
Daily Margin Coverage Program
The Dairy Margin Coverage Program is a voluntary risk management program for dairy producers. This provides protection when the difference between the all-milk price and the average feed cost falls under a certain dollar amount chosen by the producer. This can give you also a choice of a catastrophic coverage level of coverage and buy-up coverage. Catastrophic coverage is used when the national dairy production margin is less than $4 per hundredweight.
Other Types Of Insurance Needed By Farmers
Health and Life Insurance
You may also need health and life insurance for yourself and family members or as part of a benefits package for your employees or workers. You may also need business interruption insurance, employee dishonesty insurance, and key employee insurance. Insurance can be so expensive. You also need to assess the risks you may encounter in your business and also assess if you can survive and continue with your business when you also encounter a loss. Offering benefits such as life and health insurance can attract your employees to stay in your business.
Coronary and dental health are directly connected. You can stay healthy if you take care of both your heart and teeth.
This kind of insurance can help you in case you meet with an accident during work and you get disabled. This insurance will give you enough income even if you cannot go to work.
Employee Dishonesty Insurance
Employee Dishonesty Insurance can cover businesses that have employees who have control over checkbooks and records. If an employee for instance hides the money received during the marketing of the product, this type of insurance will cover the loss. You may also want to have your financial employees covered with an agreement to protect your business.
Key Employee Insurance
Key Employee Insurance is an insurance that will cover a key employee that is very important to your business. The insurance will provide an income once the key employee will no longer work for the company. An example of this key employee is the farm manager. The business would surely suffer if the person overseeing the business will no longer be able to work. This insurance will cover the expenses to hire a person with the same expertise.
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